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QUESTION 2 [30 MARKS] Cheng is a sole trader. The following balances were extracted from his books on 30th September 2020. $ Revenue 315 000 Purchases 165 000 Returns outwards 2 600 Wages and salaries 34 800 Motor vehicle expenses 17 200 Commission receivable 12500 Rent 15 000 Provision for doubtful debts 1 000 6% Bank loan (repayable 30th June 2029) 30 000 Bank interest paid 1 200 Inventory at 1 st October 2019 36 800 Heat and light 6 500 Other operating expenses 7 100 Cash and bank 19 500 debit Trade payables 25 000 Trade receivables 34 000 Capital 15 000 Drawings 18 000 Motor vehicles (cost) 50 000 Fixtures and fittings (cost) 24 000 Provision for depreciation: Motor vehicles 10 000 Fixtures and fittings 18 000 Page 7 of 10 Additional information at 30 th September 2020 1. Inventory was valued at $29 980. 2. The rent expense included a prepayment of $2000 and other operating expenses accrued were $1100. 3. Commission receivable of $2500 was outstanding. 4. Depreciation is to be charged on all non-current assets owned at the end of the year as follows: (i) Motor vehicles at the rate of 20% per annum using the diminishing (reducing) balance method (ii) Fixtures and fittings at the rate of 15% per annum, using the straight-line method. 5. Trade receivables of $2000 are irrecoverable. The provision for doubtful debts is to be maintained at 5% on the remaining trade receivables. REQUIRED (a) Prepare the income statement for the year ended 30th September 2020. [15 marks] (b) Prepare a statement of financial position as at 30th September 2020. [10 marks] (c) Financial statements are needed by various stakeholders of the firm for a variety of purposes. Discuss the usefulness of the financial statement to the following users of accounts: (i) Management [2 marks] (ii) Employees and Trade Unions [3 marks]